The trustee of two defined benefit pension plans of failed auto manufacturer MG Rover Group Ltd. said it will seek to turn over the plans to the new pension insurer (See Britain’s Answer to PBGC Opens for Business ), according to a Business Insurance report.While no pension plans are drawing on the fund, an agency spokesman said, in addition to MG Rover, four other companies have applied to have their claim for eligibility for the fund validated.
Independent Trustee Services (ITS) Ltd., a unit of London-based broker Jardine Lloyd Thompson Group P.L.C., was appointed as trustee to MG Rover’s two defined benefit pension plans in early April. The Pension Protection Fund is financed by a fee paid by plan sponsors.
Under the terms of fund, employees who have reached retirement age at the time of an insolvency receive 100% of their benefits, but employees below that age receive 90% of promised benefits.
“Based on initial actuarial advice received by ITS, both schemes are underfunded and the level of benefits available from the Pension Protection Fund at normal scheme pension age (65) are likely to be greater, for the vast majority of members, than the benefits available if the schemes had to wind up by purchasing annuity policies with an insurance company,” Chris Martin, managing director of ITS, said in a statement, according to the news report.
John Ralfe, an independent pension consultant, said in a research note that the larger of the two plans, the MG Rover Group Pension Scheme, likely has a deficit of about £50 million ($95.2 million). That plan has about 7,000 members, according to ITS. The second defined benefit plan, the MG Rover Group Senior Pension Scheme, has about 100 members, ITS said.
The PBGC insures private-sector pensions in the US and is funded by insurance fees paid by covered companies and investment income.